Internal Revenue Bulletin 2020-31 (PDF rendition): IRS Notices

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

Bulletin No. 2020–31
July 27, 2020
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
EMPLOYMENT TAX,
SELF-EMPLOYMENT TAX
Notice 2020-54, page 226.
Notice 2020-54 provides guidance to employers on the re-
quirement to report the amount of qualified sick leave wages
and qualified family leave wages paid to employees under
the Families First Coronavirus Response Act (Families First
Act), Pub. L. No. 116-127, 134 Stat. 178 (March 18, 2020).
Employers will be required to report these amounts either on
Form W-2, Box 14, or on a separate statement. This required
reporting provides employees who are also self-employed
with information necessary for properly claiming qualified
sick leave equivalent or qualified family leave equivalent cred-
its under the Families First Act.
INCOME TAX
REG-123027-19, page 229.
These proposed regulations relax the minimum compli-
ance-monitoring sampling requirement for purposes of phys-
ical inspections and low-income certification review provided
in the Amendments to the Low-Income Housing Credit Com-
pliance-Monitoring Regulations (T.D. 9848) published in the
Federal Register (84 FR 6076).
Finding Lists begin on page ii.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing of-
ficial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
July 27, 2020 Bulletin No. 2020–31

Part III
Guidance on Reporting
Qualified Sick Leave Wages
and Qualified Family Leave
Wages Paid Pursuant to the
Families First Coronavirus
Response Act
Notice 2020-54
I. PURPOSE
This notice provides guidance to em-
ployers on the requirement to report the
amount of qualified sick leave wages and
qualified family leave wages paid to em-
ployees under the Families First Corona-
virus Response Act (Families First Act),
Pub. L. No. 116-127, 134 Stat. 178 (March
18, 2020). Employers will be required to
report these amounts either on Form W-2,
Box 14, or on a separate statement. This
required reporting provides employees
who are also self-employed with infor-
mation necessary for properly claiming
qualified sick leave equivalent or qualified
family leave equivalent credits under the
Families First Act.
II. BACKGROUND
The Families First Act generally re-
quires employers with fewer than 500
employees to provide paid leave due
to certain circumstances related to the
Coronavirus Disease 2019 (COVID-19)
through two separate provisions: the
Emergency Paid Sick Leave Act and the
Emergency Family and Medical Leave
Expansion Act.
Division E of the Families First Act,
the Emergency Paid Sick Leave Act
(EPSLA), requires certain employers to
provide employees with up to 80 hours of
paid sick leave if the employee is unable
to work or telework because the employ-
ee:
(1) is subject to a Federal, State, or lo-
cal quarantine or isolation order related to
COVID-19;
(2) has been advised by a health care
provider to self-quarantine due to con-
cerns related to COVID-19;
(3) is experiencing symptoms of
COVID-19 and seeking a medical diag-
nosis;
(4) is caring for an individual who
is subject to a Federal, State, or local
quarantine or isolation order related to
COVID-19, or has been advised by a
health care provider to self-quarantine due
to concerns related to COVID-19;
(5) is caring for a son or daughter of
such employee if the school or place
of care of the son or daughter has been
closed, or the child care provider of such
son or daughter is unavailable, due to
COVID-19 precautions; or
(6) is experiencing any other substan-
tially similar condition specified by the
Secretary of Health and Human Services
in consultation with the Secretaries of the
Treasury and Labor.
1
An employee who is unable to work or
telework for reasons related to COVID-19
described in (1), (2), or (3) above is enti-
tled to paid sick leave at the employee’s
regular rate of pay or, if higher, the Federal
minimum wage or any applicable State or
local minimum wage, up to $511 per day
and $5,110 in the aggregate. An employ-
ee who is unable to work or telework for
reasons related to COVID-19 described in
(4), (5), or (6) above is entitled to paid sick
leave at two-thirds the employee’s regular
rate of pay or, if higher, the Federal mini-
mum wage or any applicable State or local
minimum wage, up to $200 per day and
$2,000 in the aggregate.
Division C of the Families First Act,
the Emergency Family and Medical Leave
Expansion Act (EFMLEA), amends the
Family and Medical Leave Act of 1993
to require employers to provide expanded
paid family and medical leave to employ-
ees who are unable to work or telework
for reasons related to COVID-19. An em-
ployee can receive up to 10 weeks of paid
family and medical leave at two-thirds
the employee’s regular rate of pay, up to
$200 per day and $10,000 in the aggregate
if the employee is unable to work or tele-
work because the employee is caring for
a son or daughter whose school or place
of care is closed or whose child care pro-
vider is unavailable for reasons related to
COVID-19.
Sections 7001 and 7003 of the Families
First Act generally provide that employers
subject to the paid leave requirements un-
der EPSLA and EFMLEA (“eligible em-
ployers”) are entitled to fully refundable
tax credits to cover the cost of the leave
required to be paid for those periods of
time during which employees are unable
to work or telework for reasons related to
COVID-19.
2
Eligible employers are entitled to re-
ceive a refundable credit equal to the
amount of the qualified sick leave wages
and qualified family leave wages (col-
lectively “qualified leave wages”), plus
allocable qualified health plan expenses.
The credit is allowed against the taxes
imposed on employers by section 3111(a)
of the Internal Revenue Code (Code)
(the Old-Age, Survivors, and Disability
Insurance tax (social security tax)), first
reduced by any credits claimed under sec-
tions 3111(e) and (f) of the Code, and sec-
tion 3221(a) of the Code (the Railroad Re-
tirement Tax Act Tier 1 tax), on all wages
and compensation paid to all employees.
Under section 7005 of the Families First
Act, the qualified leave wages are not sub-
ject to the taxes imposed on employers by
sections 3111(a) and 3221(a) of the Code.
In addition, section 7005 provides that the
credits under sections 7001 and 7003 of
the Families First Act are increased by
the amount of the tax imposed by section
3111(b) of the Code (employer’s share of
Medicare tax) on qualified leave wages.
3
Specifically, section 7001(b) of the
Families First Act provides eligible em-
1
As of the date this Notice is being released, the U.S. Department of Health and Human Services has not yet specified any other such conditions.
2
Under sections 7001(d)(4) and 7003(d)(4) of the Families First Act, these credits do not apply to the government of the United States, the government of any State or political subdivision
thereof, or any agency or instrumentality of any of the foregoing.
3
The credit for the employer’s share of Medicare tax does not apply to eligible employers that are subject to Railroad Retirement Tax Act (RRTA) because under section 7005(a) of the
Families First Act qualified leave wages are not subject to Medicare tax under RRTA due to that section’s reference to section 3221(a) of the Code, which includes both social security tax
and Medicare tax.
July 27, 2020 226 Bulletin No. 2020–31

ployers with a refundable tax credit for
qualified sick leave wages paid to an em-
ployee not to exceed $200 (or $511 in
the case of any day any portion of which
the employee is paid sick time described
in paragraph (1), (2), or (3) of section
5102(a) of the EPSLA) for any day (or
portion thereof), and the maximum num-
ber of days that may be taken into account
per employee is ten days. Section 7003(b)
of the Families First Act provides eligible
employers with a refundable tax credit
for qualified family leave wages paid to
an employee not to exceed $200 per day,
and the aggregate credit may not exceed
$10,000 per employee. Up to ten weeks of
qualifying family leave wages can be tak-
en into account for the credit.
Sections 7002(a) and 7004(a) of the
Families First Act entitle a self-employed
individual to a refundable credit against
income tax imposed on self-employment
income for qualified sick leave equivalent
amounts and qualified family leave equiv-
alent amounts. The credit is available to
self-employed individuals carrying on any
trade or business within the meaning of
section 1402 of the Code if the self-em-
ployed individual would be entitled to re-
ceive paid leave under the EPSLA or the
EFMLEA if the individual were an em-
ployee of an employer (other than himself
or herself).
The refundable credits authorized un-
der the Families First Act apply to qual-
ified sick leave wages and qualified fam-
ily leave wages paid with respect to the
period beginning on April 1, 2020, and
ending on December 31, 2020.
4
The same
period is used to determine the refundable
credits for qualified sick leave equivalent
amounts and qualified family leave equiv-
alent amounts for self-employed individ-
uals.
If a self-employed individual is entitled
to a refundable credit for a qualified sick
leave equivalent amount under section
7002(a) of the Families First Act and also
receives qualified sick leave wages as an
employee that are required to be paid un-
der the EPSLA, section 7002(d)(3) of the
Families First Act reduces the qualified
sick leave equivalent amount for which
the self-employed individual may claim a
tax credit to the extent that the sum of the
qualified sick leave equivalent amount de-
scribed in section 7002(c) of the Families
First Act and any qualified sick leave wag-
es under section 7001(b)(1) of the Fami-
lies First Act exceeds $2,000 (or $5,110 in
the case of any day any portion of which
is paid sick time described in paragraph
(1), (2), or (3) of section 5102(a) of the
EPSLA). Similarly, if a self-employed in-
dividual is entitled to a refundable cred-
it for a qualified family leave equivalent
amount under section 7004(a) of the Fam-
ilies First Act and also receives qualified
family leave wages as an employee under
the EFMLEA, section 7004(d)(3) of the
Families First Act reduces the qualified
family leave equivalent amount for which
the self-employed individual may claim a
tax credit to the extent that the sum of the
qualified family leave equivalent amount
described in section 7004(c) of the Fam-
ilies First Act and the qualified family
leave wages under section 7003(b)(1) of
the Families First Act exceeds $10,000.
Section 7002(g) and section 7004(e)
of the Families First Act provide that the
Secretary of the Treasury shall prescribe
such regulations or other guidance as may
be necessary to carry out the purposes of
sections 7002 and 7004 of the Families
First Act, respectively.
III. REPORTING REQUIREMENTS
In order to provide self-employed in-
dividuals who also receive wages or com-
pensation as employees with the infor-
mation they need to properly claim any
qualified sick leave equivalent or qualified
family leave equivalent credits for which
they are eligible, this notice requires em-
ployers to report to employees the amount
of qualified sick leave wages and qualified
family leave wages paid to the employees
under sections 7001 or 7003 of the Fam-
ilies First Act, respectively. Employers
must separately state the total amount of
qualified sick leave wages paid pursuant
to paragraphs (1), (2), or (3) of section
5102(a) of the EPSLA, qualified sick
leave wages paid pursuant to paragraphs
(4), (5), and (6) of section 5102(a) of the
EPSLA, and qualified family leave wag-
es paid pursuant to section 3102(b) of the
EFMLEA. Employers must separately
state each of these wage amounts either on
Form W-2, Box 14 or on a separate state-
ment. Self-employed individuals claiming
qualified sick leave equivalent or qualified
family leave equivalent credits must then
report these qualified sick leave and qual-
ified family leave wage amounts on Form
7202, Credits for Sick Leave and Family
Leave for Certain Self-Employed Indi-
viduals, included with their income tax
returns, and reduce (but not below zero)
any qualified sick leave or qualified fami-
ly leave equivalent credits by the amount
of these qualified leave wages.
Reporting Qualified Sick Leave Wages
In addition to including qualified sick
leave wages in the amount of wages paid
to the employee reported in Boxes 1, 3 (up
to the social security wage base), and 5 of
Form W-2 (or, in the case of compensa-
tion subject to the RRTA, in the amount of
RRTA compensation paid to the employee
reported in Boxes 1 and 14 of Form W-2
5
),
employers must report to the employee
the following type and amount of the wag-
es that were paid, with each amount sep-
arately reported either in Box 14 of Form
W-2 or on a separate statement:
• the total amount of qualified sick
leave wages paid for reasons de-
scribed in paragraphs (1), (2), or (3)
of section 5102(a) of the EPSLA; in
labeling this amount, the employer
must use the following, or similar,
language: “sick leave wages subject
to the $511 per day limit;” and
• the total amount of qualified sick
leave wages paid for reasons de-
4
Sections 7001(g) and 7003(g) of the Families First Act provide that sections 7001 and 7003 apply to wages paid with respect to the period beginning on a date selected by the Secretary of
the Treasury which is during the 15-day period beginning on the date of the enactment of the Families First Act (March 18, 2020). Notice 2020-21, 2020-16 I.R.B. 660, provides that the tax
credits for qualified sick leave wages and qualified family leave wages under sections 7001 and 7003 of the Families First Act apply to wages paid for the period beginning on April 1, 2020,
and ending on December 31, 2020.
5
Railroad employers are directed by the instructions to Form W-2 to report certain specified amounts in Box 14. Other employers are directed to use Box 14 “for any other information that
you want to give to your employee. Label each item.” This notice directs all employers to use Box 14 to report qualified sick leave wages and qualified family leave wages, unless a separate
statement is used instead.
Bulletin No. 2020–31 227 July 27, 2020

July 27, 2020 228 Bulletin No. 2020–31
scribed in paragraphs (4), (5), or (6)
of section 5102(a) of the EPSLA; in
labeling this amount, the employer
must use the following or similar lan-
guage: “sick leave wages subject to
the $200 per day limit.”
If a separate statement is provided and
the employee receives a paper Form W-2,
then the statement must be included with
the Form W-2 provided to the employee,
and if the employee receives an electronic
Form W-2, then the statement shall be pro-
vided in the same manner and at the same
time as the Form W-2.
Reporting Qualified Family Leave Wages
In addition to including qualified fam-
ily leave wages in the amount of wages
paid to the employee reported in Boxes 1,
3 (up to the social security wage base), and
5 of Form W-2 (or, in the case of compen-
sation subject to RRTA, in the amount of
RRTA compensation paid to the employee
reported in Boxes 1 and 14 of Form W-2),
employers must separately report to the
employee the total amount of qualified
family leave wages paid to the employee
under the EFMLEA either in Box 14 of
Form W-2 or on a separate statement. In
labeling this amount, the employer must
use the following, or similar, language:
“emergency family leave wages.” If a sep-
arate statement is provided and the em-
ployee receives a paper Form W-2, then
the statement must be included with the
Form W-2 sent to the employee, and if
the employee receives an electronic Form
W-2, then the statement shall be provided
in the same manner and at the same time
as the Form W-2.
Model Language for Employee
Instructions
As part of the Instructions for Employ-
ee, under the instructions for Box 14, for
the Forms W-2, or in a separate statement
sent to the employee, the employer may
provide additional information about qual-
ified sick leave wages and qualified family
leave wages and explain that these wag-
es may limit the amount of the qualified
sick leave equivalent or qualified family
leave equivalent credits to which the em-
ployee may be entitled with respect to any
self-employment income. The following
model language (modified as necessary)
may be used:
“Included in Box 14, if applicable, are
amounts paid to you as qualified sick
leave wages or qualified family leave
wages under the Families First Corona-
virus Response Act. Specifically, up to
three types of paid qualified sick leave
wages or qualified family leave wages
are reported in Box 14:
• Sick leave wages subject to the $511
per day limit because of care you
required;
• Sick leave wages subject to the
$200 per day limit because of care
you provided to another; and
• Emergency family leave wages.
If you have self-employment income
in addition to wages paid by your
employer, and you intend to claim
any qualified sick leave or qualified
family leave equivalent credits, you
must report the qualified sick leave or
qualified family leave wages on Form
7202, Credits for Sick Leave and
Family Leave for Certain Self-Em-
ployed Individuals, included with
your income tax return and reduce
(but not below zero) any qualified
sick leave or qualified family leave
equivalent credits by the amount of
these qualified leave wages. If you
have self-employment income, you
should refer to the instructions for
your individual income tax return for
more information.”
IV. PAPERWORK REDUCTION ACT
Any collection of information associ-
ated with this notice has been submitted
to the Office of Management and Budget
for review under OMB control number
1545-0008 in accordance with the Paper-
work Reduction Act of 1995 (44 U.S.C.
3507(d)). An agency may not conduct or
sponsor and a person is not required to re-
spond to a collection of information unless
it displays a valid OMB control number.
V. DRAFTING INFORMATION
The principal author of this notice is
Michael Gitlin. For further information on
the provisions of this notice, please con-
tact Mr. Gitlin at 202-317-6798 (not a toll-
free number).

Bulletin No. 2020–31 229 July 27, 2020
Part IV
Notice of Proposed
Rulemaking
Low-Income Housing Credit
Compliance-Monitoring
Regulations
REG-123027-19
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
proposed regulations relating to the com-
pliance-monitoring duties of State or lo-
cal housing credit agencies (Agencies)
for purposes of the low-income housing
credit under section 42 of the Internal
Revenue Code (Code). These proposed
regulations would relax the minimum
compliance-monitoring sampling require-
ment for purposes of physical inspections
and low-income certification review pro-
vided in the Amendments to the Low-In-
come Housing Credit Compliance-Moni-
toring Regulations (T.D. 9848) published
in the Federal Register (84 FR 6076). The
proposed regulations will affect owners of
low-income housing projects, tenants in
those low-income housing projects, and
Agencies that administer the credit.
DATES: Written or electronic comments
and requests for a public hearing must be
received by September 8, 2020.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically. Submit electronic submis-
sions via the Federal eRulemaking Portal
at www.regulations.gov (indicate IRS and
REG-123027-19) by following the online
instructions for submitting comments.
Once submitted to the Federal eRulemak-
ing Portal, comments cannot be edited
or withdrawn. The IRS expects to have
limited personnel available to process
public comments that are submitted on
paper through mail. Until further notice,
any comments submitted on paper will be
considered to the extent practicable. The
Department of the Treasury (Treasury
Department) and the IRS will publish for
public availability any comment submit-
ted electronically, and to the extent practi-
cable on paper, to its public docket.
Send paper submissions to: CC:PA:LP-
D:PR (REG-123027-19), room 5203, In-
ternal Revenue Service, PO Box 7604,
Ben Franklin Station, Washington, D.C.
20044.
FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, Dillon Taylor or Michael J. Torru-
ella Costa at (202) 317-4137; concerning
submissions of comments and/or requests
for a public hearing, Regina Johnson,
(202) 317-5177 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) under section 42 of
the Code.
Section 42(m)(1) requires an Agency
to allocate housing credit dollar amounts
(the potential to earn low-income hous-
ing credits) among candidate proposed
buildings/projects. The allocation must
be pursuant to a qualified allocation plan
(QAP) that has been approved by the gov-
ernmental unit of which the Agency is a
part. A QAP not only sets forth selection
criteria by which an Agency makes these
allocations but also provides a procedure
that the Agency must follow in monitoring
for noncompliance with the provisions of
section 42, including monitoring for non-
compliance with habitability standards
through regular site visits.
Section 1.42-5 of the Income Tax
Regulations (the compliance-monitoring
regulations) provides the requirements
of a monitoring procedure that must be
part of any QAP. Among the require-
ments, an Agency must perform physical
inspections and low-income certification
review.
The compliance-monitoring regula-
tions, however, do not require that every
low-income unit in a project be monitored
for noncompliance. Instead, Agencies are
permitted to satisfy their compliance-mon-
itoring duties by physically inspecting,
and performing low-income certification
review, on only samples of those units. See
T.D. 8430, 57 FR 40118, 40121 (Sept. 2,
1992).
1
For many years, starting in 2000,
the minimum sample size for both file re-
view and on-site inspections was 20 per-
cent of the low-income units, regardless of
the size of the total population of low-in-
come units in a project. See T.D. 8859, 65
FR 2323, 2327 (Jan. 14, 2000).
On February 25, 2016, the Treasury
Department and the IRS published tempo-
rary regulations (T.D. 9753) in the Feder-
al Register (81 FR 9333), which amended
§1.42-5 of the Income Tax Regulations and
permitted the IRS to establish sample-size
criteria in guidance published in the In-
ternal Revenue Bulletin. See §601.601(d)
(2)(ii)(b) of 26 CFR Chapter 1.
2
Concur-
rently with the issuance of the temporary
regulations, Revenue Procedure 2016-15,
2016-11 I.R.B. 435, was published in the
Internal Revenue Bulletin. This revenue
procedure permitted an Agency to elect
to use sample sizes of either a minimum
of 20 percent of the low-income units in
a project (rounded up to the nearest whole
number) or the number in a chart identify-
ing minimum sample sizes depending on
the number of low-income units in a proj-
ect (the Low-Income Housing Credit Min-
imum Unit Sample Size Reference Chart).
1
Initially, the requirements were that the Agency choose which units receive low-income certification review, that the owner receive no more than reasonable notice of the review, and that
the Agency have the right to perform on-site inspection. See T.D. 8430 at 40122-23. Subsequently, some on-site inspections were required, and samples for both review and inspection were
required to be chosen randomly. See T.D. 8859, 65 FR 2323, 2327 (Jan. 14, 2000).
2
Also in the same issue of the Federal Register, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-150349-12, 81 FR 9379) (proposed regulations). The
text of the proposed regulations incorporated by cross-reference the text of the temporary regulations.

July 27, 2020 230 Bulletin No. 2020–31
The minimum sample sizes in the chart
correspond to the minimum sample sizes
required by the Department of Housing
and Urban Development’s (HUD’s) Real
Estate Assessment Center for inspections
under HUD programs (the REAC num-
bers). HUD designed this table of sample
sizes to produce a statistically consistent
level of confidence in the results of phys-
ical inspections across a broad range of
project sizes.
The revenue procedure had the effect
of reducing the minimum sample sizes for
large low-income housing projects (those
with more than 110 low-income units).
Because of the choice between using
the REAC number and 20 percent of the
low-income units, the revenue procedure
did not impact projects with fewer than
111 low-income units.
The same sample-size provisions
applied to independently selected sam-
ples on which the Agency must perform
low-income certification review. The
revenue procedure provided only mini-
mum sample sizes, permitting Agencies
to monitor compliance in more units, if
desired.
In the preamble to the temporary regu-
lations, the Treasury Department and the
IRS expressed concern that, in smaller
projects, physical inspection or low-in-
come certification review of only 20 per-
cent of the units might fail to produce
sufficiently accurate estimates of the re-
maining units’ overall compliance with
habitability and low-income certification.
To address this concern, the preamble
added that “the Treasury Department and
the IRS intend to consider whether Rev.
Proc. 2016–15 should be replaced with a
revenue procedure that does not permit
use of the 20 percent rule in those cir-
cumstances.” 81 FR at 9334. The removal
of the 20 percent option would generally
increase the number of units that needed
to be inspected in smaller projects. The
public comments on the temporary regu-
lations directed very little attention to this
potential increase.
In addition, the preamble invited fun-
damental suggestions to make inspections
less burdensome:
The Treasury Department and the
IRS believe the methods in Rev. Proc.
2016-15 reasonably balance the bur-
den on Agencies, tenants, and build-
ing owners while adequately monitor-
ing compliance. However, additional
comments may be submitted on other
possible methods, including stratified
sampling procedures and estimation
methodologies. To be useful, any such
comments should include substantial
detail regarding the procedures to be
adopted and should provide thorough
justification as to whether the sug-
gested methods effectively reduce
burden without negatively impacting
the confidence that can be placed in
the results obtained from the resulting
samples.
Id. at 9336. The public submitted no com-
ment letters specifically responsive to this
request.
On February 26, 2019, the Treasury
Department and IRS published regula-
tions (T.D. 9848) in the Federal Register
(84 FR 6076), finalizing the temporary
regulations. Because these final regula-
tions contain provisions directly address-
ing all issues previously addressed in Rev-
enue Procedure 2016-15, the preamble of
the final regulations declares that revenue
procedure obsolete with respect to an
Agency as of the date on which the Agen-
cy’s QAP is amended to reflect the final
regulations and, in all cases, after Decem-
ber 31, 2020. See 84 FR at 6078. Among
other provisions, the final regulations re-
quire Agencies to inspect no fewer units
than the number specified for projects of
the relevant size in the REAC numbers.
This requirement has the effect of increas-
ing the sample sizes for smaller projects.
The Treasury Department and the IRS de-
termined that the REAC numbers produce
a statistically valid sampling of units and
that using them yielded a consistent level
of confidence in the compliance-monitor-
ing results for projects of various sizes.
The final regulations allow Agencies a
reasonable period of time to amend their
QAPs for this purpose, but require QAPs
to be amended no later than December 31,
2020.
Since the publication of the final reg-
ulations, the Treasury Department and
the IRS have received numerous oral and
written comments from Agencies, stake-
holders, and trade groups representing
Agencies. In particular, these comments
expressed concern that the final regula-
tions ended Agencies’ ability to use sam-
ples of 20 percent of the low-income units
in a project when the applicable REAC
number is larger. Consistent with the
comments and letters, the trade groups’
comment letters expressed concern about
the situations in which the REAC num-
bers would increase the number of units
that Agencies must examine, thereby in-
creasing Agencies’ costs for additional
staff and other related expenditures and
burdens. One trade group further ex-
plained that many Agencies would en-
counter difficulty in addressing increased
staffing needs and other new costs due
to overall State budget constraints. The
trade group observed that cost increases
are also likely to cause Agencies to in-
crease the compliance-monitoring fees
that they charge to building owners. If
fees are not increased enough to cover
the increased costs, Agencies will have
to divert resources from other affordable
housing priorities to fund their compli-
ance-monitoring activities. The trade
group noted that terminating the ability
to use the 20 percent samples will have
its most significant impact on States with
numerous small projects, predominantly
in rural areas, and that some States with
only small projects may even experience
a 100 percent increase in burden.
Explanation of Provisions
The final regulations reflected the be-
lief of the Treasury Department and the
IRS that a higher compliance-monitoring
burden on Agencies was justified by the
increased statistical confidence that results
from the use of the REAC numbers to de-
termine sample sizes for smaller projects.
The comments on the final regulations,
however, have demonstrated the magni-
tude of the increased costs and burdens
that this requirement imposes on Agen-
cies. As a result of these comments, the
Treasury Department and the IRS have
greater awareness of the many practical
challenges Agencies experience in using
samples greater than 20 percent while car-
rying out their compliance-monitoring re-
sponsibilities. Furthermore, the comments
noted that many Agencies typically eval-
uate each project to determine if circum-

Bulletin No. 2020–31 231 July 27, 2020
stances warrant the inspection and review
of more units than the required minimum.
Complying with the REAC numbers when
an Agency believes that smaller samples
would be sufficient may have the effect of
depriving the Agency of the resources that
it requires to engage in additional com-
pliance-monitoring activities on projects
that manifest the need for inspection and
review of more than the minimum sample
of units.
Although there is value in providing a
level of confidence that is more consistent
over a broad range of project sizes, that
increased consistency is outweighed in
this context by concerns over Agencies’
compliance-monitoring burdens. One
goal of the compliance-monitoring regu-
lations is to increase flexibility and reduce
burden, so that Agencies may fulfill their
compliance-monitoring responsibilities
in an efficient and cost-effective manner.
Accordingly, the Treasury Department
and the IRS propose returning to the sam-
ple-size requirements that applied under
the temporary regulations. Thus, under
these proposed regulations, the minimum
number of low-income units that must be
included in the random samples on which
an Agency conducts physical inspections
or low-income certification review is the
lesser of the applicable REAC number
or 20 percent of the low-income units in
the project, rounded up to the next whole
number.
Proposed Applicability Date
These regulations are proposed to ap-
ply beginning after the date these regula-
tions are published as final regulations in
the Federal Register. However, an Agen-
cy may rely on these proposed regulations
beginning on February 26, 2019, until De-
cember 31 of the calendar year following
the year that contains the date these regu-
lations are published as final regulations
in the Federal Register.
Special Analyses
This regulation is not subject to review
under section 6(b) of Executive Order
12866 pursuant to the Memorandum of
Agreement (April 11, 2018) between the
Treasury Department and the Office of
Management and Budget regarding re-
view of tax regulations.
In accordance with the Regulatory
Flexibility Act (5 U.S.C. chapter 6) it
is hereby certified that these regulations
will not impose a significant economic
impact on a substantial number of small
entities. These regulations reinstate the
minimum compliance-monitoring sam-
pling requirement for purposes of phys-
ical inspections and low-income certifi-
cation review previously provided under
the temporary regulations (T.D. 9753)
published in the Federal Register (81
FR 9333) on February 25, 2016. These
previously provided requirements had
been and continue to be relied upon by
Agencies since 2016.
Pursuant to section 7805(f) of the In-
ternal Revenue Code, these regulations
will be submitted to the Chief Counsel for
Advocacy of the Small Business Admin-
istration for comment on their impact on
small business.
Comments and Requests for a Public
Hearing
Before these proposed amendments
to the regulations are adopted as final
regulations, consideration will be given
to comments that are submitted timely
to the IRS as prescribed in the preamble
under the “ADDRESSES” section. The
Treasury Department and the IRS request
comments on all aspects of the proposed
regulations. Any electronic comments
submitted, and to the extent practicable
any paper comments submitted, will be
made available at www.regulations.gov or
upon request.
A public hearing will be scheduled if
requested in writing by any person who
timely submits electronic or written com-
ments. Requests for a public hearing are
also encouraged to be made electronically.
If a public hearing is scheduled, notice of
the date and time for the public hearing
will be published in the Federal Regis-
ter. Announcement 2020-4, 2020-17 IRB
1, provides that until further notice, pub-
lic hearings conducted by the IRS will be
held telephonically. Any telephonic hear-
ing will be made accessible to people with
disabilities.
Drafting Information
The principal authors of these regu-
lations are Dillon Taylor and Michael J.
Torruella Costa, Office of the Associate
Chief Counsel (Passthroughs and Spe-
cial Industries). However, other person-
nel from the Treasury Department and
the IRS participated in their develop-
ment.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Amend §1.42-5 by revising
paragraphs (c)(2)(iii)(B) and (h) to read as
follows:
§1.42-5 Monitoring compliance with
low-income housing credit requirements.
* * * * *
(c) * * *
(2) * * *
(iii) * * *
(B) Number of low-income units. The
minimum number of low-income units for
which the Agency must conduct on-site
inspections and low-income certification
review is the lesser of—
(1) 20 percent of the low-income units
in the low-income housing project, round-
ed up to the nearest whole number of
units; or
(2) the Minimum Unit Sample Size set
forth in the following Low-Income Hous-
ing Credit Minimum Unit Sample Size
Reference Chart:

July 27, 2020 232 Bulletin No. 2020–31
Table 1 to Paragraph (c)(2)(iii)
Number of Low-Income Units in the Low-Income Housing
Project
Number of Low-Income Units Selected for Inspection or for
Low-Income Certification Review (Minimum Unit Sample
Size)
11
22
33
44
5-65
76
8-97
10-118
12-139
14-1610
17-1811
19-2112
22-2513
26-2914
30-3415
35-4016
41-4717
48-5618
57-6719
68-8120
82-10121
102-13022
131-17523
176-25724
258-44925
450-1,46126
1,462-9,99927
* * * * *
(h) Applicability dates. The require-
ments in paragraph (c)(2)(iii)(B) of this
section apply beginning after the date final
regulations are published in the Federal
Register.
Douglas W. O’Donnell,
Acting Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on July
2, 2020, 4:15 p.m., and published in the issue of the
Federal Register for July 7, 2020, 85 F.R. 40610)

Bulletin No. 2020–31 i July 27, 2020
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previous-
ly published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cas-
es in litigation, or the outcome of a Ser-
vice study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

July 27, 2020 ii Bulletin No. 2020–31
Numerical Finding List
1
Bulletin 2020–31
Notices:
2020-43, 2020-27 I.R.B. 1
2020-45, 2020-27 I.R.B. 3
2020-46, 2020-27 I.R.B. 7
2020-47, 2020-27 I.R.B. 7
2020-49, 2020-27 I.R.B. 8
2020-50, 2020-28 I.R.B. 35
2020-48, 2020-29 I.R.B. 72
2020-51, 2020-29 I.R.B. 73
2020-52, 2020-29 I.R.B. 79
2020-53, 2020-30 I.R.B. 151
2020-54, 2020-31 I.R.B. 226
Proposed Regulations:
REG-119307-19, 2020-28 I.R.B. 44
REG-112339-19, 2020-30 I.R.B. 155
REG-117589-18, 2020-30 I.R.B. 184
REG-125716-18, 2020-30 I.R.B. 197
REG-123027-19, 2020-31 I.R.B. 229
Revenue Procedures:
2020-16, 2020-27 I.R.B. 10
2020-31, 2020-27 I.R.B. 12
2020-35, 2020-29 I.R.B. 82
Revenue Rulings:
2020-14, 2020-28 I.R.B. 33
Treasury Decisions:
9899, 2020-29 I.R.B. 62
9900, 2020-30 I.R.B. 143
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

Bulletin No. 2020–31 iii July 27, 2020
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2020–31
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

Internal Revenue Service
Washington, DC 20224
Official Business
Penalty for Private Use, $300
INTERNAL REVENUE BULLETIN
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available at www.irs.gov/irb/.
We Welcome Comments About the Internal Revenue Bulletin
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it,
we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page
www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.
NW, IR-6230 Washington, DC 20224.